Based in Memphis, TN, Smith & Nephew has sold the Modular SMF and REDAPT implants for almost a decade. In its letter to doctors, the company admitted that “Smith & Nephew considers that patients implanted with the modular neck hip prostheses may be at greater risk of revision surgery than with comparable monolithic products.”

Metal-Related Adverse Events

The letter states, “We observed a rate of complaints higher than comparable monolithic hip prostheses. Metal-related complaints are trending upward year-on-year with an overall complaint rate (number of complaints/total implantations) of 0.527% for Modular SMF and 0.25% for Modular REDAPT Revision Femoral Hip Systems. Overall, the metal-related Adverse Events accounted for the highest category of complaints in both products.

“For patients that exhibit these symptoms, physicians may consider additional clinical follow-up which includes the following:

Where appropriate and subject to the clinician’s assessment, further active evaluation of the potential soft tissue reactions either through ultrasound or cross-sectional imaging might be indicated.”

Hip litigation

In related litigation, plaintiffs who were injured by Smith & Nephew’s Birmingham Hip Resurfacing (“BHR”) system and R3 metal-on-metal liner (“R3”) have filed a motion with the Judicial Panel on Multidistrict Litigation to create new MDL No. 2775 in the US District Court for the District of Maryland.

The plaintiffs allege that the BHR and R3 devices have caused toxic levels of cobalt and chromium in the bodies of patients implanted with the devices, and caused other symptoms including metallosis, pain, adverse local tissue reaction, pseudotumor, bone and tissue necrosis, and other symptoms leading to revision surgery.

Modular femoral stems have been a big problem in orthopedics for years. Stryker Orthopedics had to recall two of its modular stems in 2012 because of very high failure rates. A total of 1,807 cases have been filed in MDL 2441 against Stryker before Sr. US District JudgeDonovan W. Frank in Minnesota.

In two related settlements German automaker Volkswagen AG and related entities have agreed to spend up to $14.7 billion to settle allegations of cheating emissions tests and deceiving customers.

Volkswagen will offer consumers a buyback and lease termination for nearly 500,000 Volkswagen TDI diesel models of Jettas, Passats, Golfs and Beetles as well as the TDI Audi A3 for model years 2009 through 2015. VW will spend up to $10.03 billion to compensate consumers under the program. In addition, the companies will spend $4.7 billion to mitigate the pollution from these cars and invest in green vehicle technology.

The settlements partially resolve allegations by the Environmental Protection Agency (EPA), as well as the California Attorney General’s Office and the California Air Resources Board (CARB) under the Clean Air Act, California Health and Safety Code, and California’s Unfair Competition Laws, relating to the vehicles’ use of “defeat devices” to cheat emissions tests.

The settlements also resolve claims by the FTC that Volkswagen violated the FTC Act through the deceptive and unfair advertising and sale of its “clean diesel” vehicles. The settlements do not resolve pending claims for civil penalties or any claims concerning 3.0 liter diesel vehicles. Nor do they address any potential criminal liability.

Separately, VW is facing 1,332 mass tort lawsuits in MDL 2672, supervised by Sr. US District Judge Charles R. Breyer in the Northern District of California. The docket is In re: Volkswagen “Clean Diesel,” Product Liability Litigation, Case No. 15-MD-2672-CRB. In a proposed settlement, Volkswagen has agreed to create a single funding pool of a maximum of $10 billion from which Class Members will be compensated under the Class Settlement Program.

Illegal “defeat” software

“Today’s announcement shows the high cost of violating our consumer protection and environmental laws,” said FTC Chairwoman Edith Ramirez. “Just as importantly, consumers who were cheated by Volkswagen’s deceptive advertising campaign will be able to get full and fair compensation, not only for the lost or diminished value of their car but also for the other harms that VW caused them.”

According to the Justice Department’s civil complaint against Volkswagen filed on behalf of EPA on January 4, 2016, Volkswagen allegedly equipped its 2.0 liter diesel vehicles with illegal software that detects when the car is being tested for compliance with EPA or California emissions standards and turns on full emissions controls only during that testing process. During normal driving conditions, the software renders certain emission control systems inoperative, greatly increasing emissions.

This is known as a “defeat device.” Use of the defeat device results in cars that meet emissions standards in the laboratory, but emit harmful NOx at levels up to 40 times EPA-compliant levels during normal on-road driving conditions. The Clean Air Act requires manufacturers to certify to EPA that vehicles will meet federal emission standards. Vehicles with defeat devices cannot be certified.

The settlements use the authorities of both the EPA and the FTC as part of a coordinated plan that gets the high-polluting VW diesels off the road, makes the environment whole, and compensates consumers.

The settlements require Volkswagen to offer owners of any affected vehicle the option to have the company buy back the car and to offer lessees a lease cancellation at no cost. Volkswagen may also propose an emissions modification plan to EPA and CARB, and if approved, may also offer owners and lessees the option of having their vehicles modified to substantially reduce emissions in lieu of a buyback. Under the U.S./California settlement, Volkswagen must achieve an overall recall rate of at least 85% of affected 2.0 liter vehicles under these programs or pay additional sums into the mitigation trust fund. The FTC order requires Volkswagen to compensate consumers who elect either of these options.

Volkswagen must set aside and could spend up to $10.03 billion to pay consumers in connection with the buy back, lease termination, and emissions modification compensation program. The program has different potential options and provisions for affected Volkswagen diesel owners depending on their circumstances:

Buyback option: Volkswagen must offer to buy back any affected 2.0 liter vehicle at their retail value as of September 2015 — just prior to the public disclosure of the emissions issue. Consumers who choose the buyback option will receive between $12,500 and $44,000, depending on their car’s model, year, mileage, and trim of the car, as well as the region of the country where it was purchased. In addition, because a straight buyback will not fully compensate consumers who owe more than their car is worth due to rapid depreciation, the FTC order provides these consumers with an option to have their loans forgiven by Volkswagen. Consumers who have third party loans have the option of having Volkswagen pay off those loans, up to 130 percent of the amount a consumer would be entitled to under the buyback (e.g., if the consumer is entitled to a $20,000 buyback, VW would pay off his/her loans up to a cap of $26,000).

EPA-approved modification to vehicle emissions system: The settlements also allow Volkswagen to apply to EPA and CARB for approval of an emissions modification on the affected vehicles, and, if approved, to offer consumers the option of keeping their cars and having them modified to comply with emissions standards. Under this option in accordance with the FTC order, consumers would also receive money from Volkswagen to redress the harm caused by VW’s deceptive advertising.

Consumers who leased the affected cars will have the option of terminating their leases (with no termination fee) or having their vehicles modified if a modification becomes available. In either case, under the FTC order, these consumers also will receive additional compensation from Volkswagen for the harm caused by VW’s deceptive advertising. Consumers who sold their TDI vehicles after the VW defeat device issue became public may be eligible for partial compensation, which will be split between them and the consumers who purchased the cars from them as set forth in the FTC order.

Eligible consumers will receive notice from VW after the orders are entered by the court this fall. Consumers will be able to see if they are eligible for compensation and if so, what options are available to them, at VWCourtSettlement.com(link is external) andAudiCourtSettlement.com(link is external). They will also be able to use these websites to make claims, sign up for appointments at their local Volkswagen or Audi dealers and receive updates. Consumer payments will not be available until the settlements take effect if and when approved by the court, which may be as early as October 2016.

Emissions Reduction Program: The settlement of the company’s Clean Air Act violations also requires Volkswagen to pay $2.7 billion to fund projects across the country that will reduce emissions of NOx where the 2.0 liter vehicles were, are or will be operated. Volkswagen will place the funds into a mitigation trust over three years, which will be administered by an independent trustee. Beneficiaries, which may include states, Puerto Rico, the District of Columbia, and Indian tribes, may obtain funds for designated NOx reduction projects upon application to the Trustee. Funding for the designated projects is expected to fully mitigate the NOx these 2.0 liter vehicles have and will emit in excess of EPA and California standards.

The emissions reduction program will help reduce NOx pollution that contributes to the formation of harmful smog and soot, exposure to which is linked to a number of respiratory- and cardiovascular-related health effects as well as premature death. Children, older adults, people who are active outdoors (including outdoor workers), and people with heart or lung disease are particularly at risk for health effects related to smog or soot exposure. NO2 formed by NOx emissions can aggravate respiratory diseases, particularly asthma, and may also contribute to asthma development in children.

Zero Emissions Technology Investments: The Clean Air Act settlement also requires VW to invest $2 billion toward improving infrastructure, access and education to support and advance zero emission vehicles. The investments will be made over 10 years, with $1.2 billion directed toward a national EPA-approved investment plan and $800 million directed toward a California-specific investment plan that will be approved by CARB. As part of developing the national plan, Volkswagen will solicit and consider input from interested states, cities, Indian tribes and federal agencies. This investment is intended to address the adverse environmental impacts from consumers’ purchases of the 2.0 liter vehicles, which the governments contend were purchased under the mistaken belief that they were lower emitting vehicles.

FTC’s Injunctive Relief: The FTC settlement includes injunctive provisions to protect consumers from deceptive claims in the future. These provisions prohibit Volkswagen from making any misrepresentations that would deceive consumers about the environmental benefits or value of its vehicles or services, and the order specifically bans VW from employing any device that could be used to cheat on emissions tests.

The provisions of the U.S./California settlement are contained in a proposed consent decree filed today in the U.S. District Court for the Northern District of California, as part of the ongoing multi-district litigation, and will be subject to public comment period of 30 days, which will be announced in the Federal Register in the coming days. The provisions of the FTC settlement are contained in a proposed Stipulated Final Federal Court Order filed today in the same court.

The lawsuits allege this cover-up was orchestrated at the highest levels of the company, up to and including the former CEO, Martin Winterkorn.

The Attorneys General for New York, Massachusetts and Maryland filed suit on July 19, 2016 against Volkswagen AG, Audi AG and Porsche AG, as well as their American subsidiaries, for the automakers’ sale of diesel cars that were fitted with illegal “defeat devices.”

These cars (including over 25,000 in New York, 15,000 in Massachusetts and 12,935 in Maryland) spewed illegal amounts of harmful emissions – and the companies attempting to cover-up their behavior.

“The allegations against Volkswagen, Audi and Porsche reveal a culture of deeply-rooted corporate arrogance, combined with a conscious disregard for the rule of law and the protection of public health and the environment,” New York Attorney General Schneiderman said. “These suits should serve as a siren in every corporate board room, that if any company engages in this type of calculated and systematic illegality, we will bring the full force of the law—and seek the stiffest possible sanctions—to protect our citizens.”

“Volkswagen, Audi and Porsche defrauded thousands of Massachusetts consumers, polluted our air, and damaged our environment and then, to make matters worse, plotted a massive cover-up to mislead environmental regulators,” Massachusetts Attorney General Healey said. “With today’s action, we want to make clear to all auto manufacturers that violating laws designed to protect our environment and our public health is unacceptable and will be punished with significant penalties.”

“Maryland has worked tirelessly, through Maryland’s Healthy Air Act and Clean Cars Act, as well as stringent regulations adopted by the Department of the Environment, to clean our air,” said Maryland Attorney General Frosh. “As our complaint sets out, Volkswagen, Audi and Porsche installed defeat devices in their cars to trick regulators and to deceive the public; they did so knowing that their conduct was illegal and their misconduct has hindered our efforts to clean the air and to clean the Chesapeake Bay. Their disregard for the health of our citizens and their disregard for our environment must be punished.”

10 Year Cover-Up

These lawsuits by the New York, Massachusetts and Maryland Attorneys General offices follow a nine-month long investigation by a multistate coalition of more than 40 states and other jurisdictions, led by New York, Massachusetts, and four other states. New York State’s Department of Environmental Conservation, Massachusetts’s Department of Environmental Protection and Maryland’s Department of the Environment provided important assistance with the investigation.

The complaints allege, in detail, a cover-up that Volkswagen and Audi allegedly managed for nearly a year-and-a-half. The cover-up followed a study by researchers at West Virginia University that alerted authorities in this country that these diesel cars emitted much more nitrogen oxides (NOx) when driven on the road than they did when undergoing emissions testing on test equipment used by the U.S. Environmental Protection Agency (EPA) and the California Air Resource Board (CARB) to test the amount of air pollutants emitted by automobiles.

These suits follow the car companies’ partial settlements of claims for consumer relief and consumer deception penalties, as well as their agreement to establish a fund to mitigate the environmental damage caused by their admitted misconduct. Those earlier settlements did not resolve any of the claims for civil penalties that New York, Massachusetts and other states, as well as the EPA, may bring for the companies’ flagrant violations of state and federal environmental laws and regulations, nor did the settlements cover all of the vehicles equipped with emission control defeat devices.

Lies, Cover-up, Confession

The lawsuits allege that, after the EPA and CARB contacted Volkswagen and Audi about the discrepancies revealed by the West Virginia University study — which the companies fully knew were caused by their defeat devices – Audi and Volkswagen:

Tried to cover up the problem through sham recalls that they knew would not meet the required standards;

Repeatedly failed to disclose to regulators the true reason – the defeat devices – for the discrepancies; and

Only confessed to the defeat devices when they knew the regulators had them pinned to the facts.

The lawsuits allege this cover-up was orchestrated and approved at the highest levels of the company, up to and including the former CEO, Martin Winterkorn.

Throughout this entire course of alleged illegal conduct, where dozens of employees, officers and senior executives were involved, the investigation found no evidence that a single Volkswagen, Audi or Porsche employee came forward to blow the whistle.

As alleged in the complaints, Volkswagen’s response to the scandal shows that the company has not reformed its corporate behavior. When the investigation was getting under way in late 2015, numerous employees, tipped off by a senior in-house lawyer in Germany, allegedly destroyed incriminating documents. Just last month, the Volkswagen Supervisory Board recommended a package of bonuses for the Management Board that presided over the cover-up totaling over $70 million, including generous severance pay to Mr. Winterkorn himself. That recommendation was overwhelmingly approved by the company’s shareholders.

The Attorneys Generals’ investigation also found evidence that the misconduct of Volkswagen and its Audi and Porsche subsidiaries in the production and sale of these automobiles has few parallels in corporate history.

EU knew about defeat devices

In the middle of the 2000s, European Commission experts noticed an odd phenomenon: Air quality in European cities was improving much more slowly than expected in light of stricter emissions regulations. It charged the Joint Research Centre (JRC) — an organization that carries out studies on behalf of the Commission — with measuring emissions in real-life conditions.

On October 8, 2010 — roughly three years after the JRC air quality tests — an internal memo noted that it was “well known” that there was a discrepancy between diesel vehicle emissions during the approval stage of new vehicle models and real-world driving conditions. The documents also makes the origin of this discrepancy clear: It is the product of “defeat devices” — essentially programs in the engine software — that would shut off anti-pollution controls, according to Spiegel Online.

On June 28, 2016, in settlements with the Department of Justice, the State of California, and the U.S. Federal Trade Commission (FTC), Volkswagen AG agreed to pay up to $14.7 billion to settle allegations of cheating emissions tests and deceiving customers. Volkswagen will offer consumers a buyback and lease termination for nearly 500,000 model year 2009-2015 2.0 liter diesel vehicles sold or leased in the U.S., and spend up to $10.03 billion to compensate consumers under the program. In addition, the company will spend $4.7 billion to mitigate the pollution from these cars and invest in green vehicle technology.

On July 7, 2016 California Attorney General Kamala Harris said Volkswagen AG would pay $86 million in civil penalties as part of an agreement with the state over the company’s emissions-cheating scandal.

Settlements Require VW to Spend up to $10 Billion to Buyback, Terminate Leases, or Modify Affected 2.0 Liter Vehicles and Compensate Consumers, and Spend $4.7 Billion to Mitigate Pollution and Make Investments that Support Zero-Emission Vehicle Technology

In settlements with the Department of Justice, the State of California, and the U.S. Federal Trade Commission (FTC), German automaker Volkswagen AG has agreed to spend up to $14.7 billion to settle allegations of cheating emissions tests and deceiving customers. Volkswagen will offer consumers a buyback and lease termination for nearly 500,000 model year 2009-2015 2.0 liter diesel vehicles sold or leased in the U.S., and spend up to $10.03 billion to compensate consumers under the program. In addition, the companies will spend $4.7 billion to mitigate the pollution from these cars and invest in green vehicle technology.

The settlements partially resolve allegations by the Environmental Protection Agency (EPA), as well as the California Attorney General’s Office and the California Air Resources Board (CARB) under the Clean Air Act, California Health and Safety Code, and California’s Unfair Competition Laws, relating to the vehicles’ use of “defeat devices” to cheat emissions tests. The settlements also resolve claims by the FTC that Volkswagen violated the FTC Act through the deceptive and unfair advertising and sale of its “clean diesel” vehicles. The settlements do not resolve pending claims for civil penalties or any claims concerning 3.0 liter diesel vehicles. Nor do they address any potential criminal liability.

The affected vehicles include 2009 through 2015 Volkswagen TDI diesel models of Jettas, Passats, Golfs and Beetles as well as the TDI Audi A3.

Duping the regulators

“By duping the regulators, Volkswagen turned nearly half a million American drivers into unwitting accomplices in an unprecedented assault on our environment,” said Deputy Attorney General Sally Q. Yates. “This partial settlement marks a significant first step towards holding Volkswagen accountable for what was a breach of its legal duties and a breach of the public’s trust. And while this announcement is an important step forward, let me be clear, it is by no means the last. We will continue to follow the facts wherever they go.”

“Today’s settlement restores clean air protections that Volkswagen so blatantly violated,” said EPA Administrator Gina McCarthy. “And it secures billions of dollars in investments to make our air and our auto industry even cleaner for generations of Americans to come. This agreement shows that EPA is committed to upholding standards to protect public health, enforce the law, and to find innovative ways to protect clean air.”

“Today’s announcement shows the high cost of violating our consumer protection and environmental laws,” said FTC Chairwoman Edith Ramirez. “Just as importantly, consumers who were cheated by Volkswagen’s deceptive advertising campaign will be able to get full and fair compensation, not only for the lost or diminished value of their car but also for the other harms that VW caused them.”

According to the civil complaint against Volkswagen filed by the Justice Department for EPA on January 4, 2016, Volkswagen allegedly equipped its 2.0 liter diesel vehicles with illegal software that detects when the car is being tested for compliance with EPA or California emissions standards and turns on full emissions controls only during that testing process.

Defeat device

During normal driving conditions, the software renders certain emission control systems inoperative, greatly increasing emissions. This is known as a “defeat device.” Use of the defeat device results in cars that meet emissions standards in the laboratory, but emit harmful NOx at levels up to 40 times EPA-compliant levels during normal on-road driving conditions. The Clean Air Act requires manufacturers to certify to EPA that vehicles will meet federal emission standards. Vehicles with defeat devices cannot be certified.

The FTC sued Volkswagen in March, charging that the company deceived consumers with the advertising campaign it used to promote its supposedly “clean diesel” VWs and Audis, which falsely claimed that the cars were low-emission, environmentally friendly, met emissions standards and would maintain a high resale value.

The settlements use the authorities of both the EPA and the FTC as part of a coordinated plan that gets the high-polluting VW diesels off the road, makes the environment whole, and compensates consumers.

The settlements require Volkswagen to offer owners of any affected vehicle the option to have the company buy back the car and to offer lessees a lease cancellation at no cost. Volkswagen may also propose an emissions modification plan to EPA and CARB, and if approved, may also offer owners and lessees the option of having their vehicles modified to substantially reduce emissions in lieu of a buyback. Under the U.S./California settlement, Volkswagen must achieve an overall recall rate of at least 85% of affected 2.0 liter vehicles under these programs or pay additional sums into the mitigation trust fund. The FTC order requires Volkswagen to compensate consumers who elect either of these options.

Volkswagen must set aside and could spend up to $10.03 billion to pay consumers in connection with the buy back, lease termination, and emissions modification compensation program. The program has different potential options and provisions for affected Volkswagen diesel owners depending on their circumstances:

Buyback option: Volkswagen must offer to buy back any affected 2.0 liter vehicle at their retail value as of September 2015 — just prior to the public disclosure of the emissions issue. Consumers who choose the buyback option will receive between $12,500 and $44,000, depending on their car’s model, year, mileage, and trim of the car, as well as the region of the country where it was purchased. In addition, because a straight buyback will not fully compensate consumers who owe more than their car is worth due to rapid depreciation, the FTC order provides these consumers with an option to have their loans forgiven by Volkswagen. Consumers who have third party loans have the option of having Volkswagen pay off those loans, up to 130 percent of the amount a consumer would be entitled to under the buyback (e.g., if the consumer is entitled to a $20,000 buyback, VW would pay off his/her loans up to a cap of $26,000).

EPA-approved modification to vehicle emissions system: The settlements also allow Volkswagen to apply to EPA and CARB for approval of an emissions modification on the affected vehicles, and, if approved, to offer consumers the option of keeping their cars and having them modified to comply with emissions standards. Under this option in accordance with the FTC order, consumers would also receive money from Volkswagen to redress the harm caused by VW’s deceptive advertising.

Consumers who leased the affected cars will have the option of terminating their leases (with no termination fee) or having their vehicles modified if a modification becomes available. In either case, under the FTC order, these consumers also will receive additional compensation from Volkswagen for the harm caused by VW’s deceptive advertising. Consumers who sold their TDI vehicles after the VW defeat device issue became public may be eligible for partial compensation, which will be split between them and the consumers who purchased the cars from them as set forth in the FTC order.

Eligible consumers will receive notice from VW after the orders are entered by the court this fall. Consumers will be able to see if they are eligible for compensation and if so, what options are available to them, at VWCourtSettlement.com andAudiCourtSettlement.com. They will also be able to use these websites to make claims, sign up for appointments at their local Volkswagen or Audi dealers and receive updates. Consumer payments will not be available until the settlements take effect if and when approved by the court, which may be as early as October 2016.

Emissions Reduction Program: The settlement of the company’s Clean Air Act violations also requires Volkswagen to pay $2.7 billion to fund projects across the country that will reduce emissions of NOx where the 2.0 liter vehicles were, are or will be operated. Volkswagen will place the funds into a mitigation trust over three years, which will be administered by an independent trustee. Beneficiaries, which may include states, Puerto Rico, the District of Columbia, and Indian tribes, may obtain funds for designated NOx reduction projects upon application to the Trustee. Funding for the designated projects is expected to fully mitigate the NOx these 2.0 liter vehicles have and will emit in excess of EPA and California standards.

The emissions reduction program will help reduce NOx pollution that contributes to the formation of harmful smog and soot, exposure to which is linked to a number of respiratory- and cardiovascular-related health effects as well as premature death. Children, older adults, people who are active outdoors (including outdoor workers), and people with heart or lung disease are particularly at risk for health effects related to smog or soot exposure. NO2 formed by NOx emissions can aggravate respiratory diseases, particularly asthma, and may also contribute to asthma development in children.

Zero Emissions Technology Investments: The Clean Air Act settlement also requires VW to invest $2 billion toward improving infrastructure, access and education to support and advance zero emission vehicles. The investments will be made over 10 years, with $1.2 billion directed toward a national EPA-approved investment plan and $800 million directed toward a California-specific investment plan that will be approved by CARB. As part of developing the national plan, Volkswagen will solicit and consider input from interested states, cities, Indian tribes and federal agencies. This investment is intended to address the adverse environmental impacts from consumers’ purchases of the 2.0 liter vehicles, which the governments contend were purchased under the mistaken belief that they were lower emitting vehicles.

FTC’s Injunctive Relief: The FTC settlement includes injunctive provisions to protect consumers from deceptive claims in the future. These provisions prohibit Volkswagen from making any misrepresentations that would deceive consumers about the environmental benefits or value of its vehicles or services, and the order specifically bans VW from employing any device that could be used to cheat on emissions tests.

The provisions of the U.S./California settlement are contained in a proposed consent decree filed today in the U.S. District Court for the Northern District of California, as part of the ongoing multi-district litigation, and will be subject to public comment period of 30 days, which will be announced in the Federal Register in the coming days. The provisions of the FTC settlement are contained in a proposed Stipulated Final Federal Court Order filed today in the same court.